Thread: Should We Be Talking About Living Wages Now?

Should We Be Talking About Living Wages Now?


By Jeannette Wicks-Lim
March/April 2009
Dollars & Sense: Real World Economics


The Department of Labor announced in January that the U.S. economy shed 2.8 million jobs in 2008, bringing the national unemployment rate to 7.2%—its highest level in 16 years. In today’s economic climate, the worst since the Great Depression, are the raises demanded by living-wage campaigns a luxury? Should living-wage campaigns take a back seat to pulling the economy out of recession?

For many, the answer is no. Campaigns across the country continue to build on the widespread success of a movement that has put into place more than 140 living-wage laws since the mid-1990s. Take the Hartford Living Wage Task Force in Connecticut, which is trying to expand the number of workers guaranteed a living wage under its original 1997 law. Or Santa Fe’s Living Wage Network, which fought for, and won, a cost-of-living increase to its living wage rate for 2009. Or the Nashville Movement in Tennessee, a group laying the groundwork for a campaign to establish a brand new ordinance.

They are right. Today’s economic turmoil challenges us to create practical policies to meet the heightened imperative of living wages, not to abandon them.

Why do we need living-wage campaigns? Let’s consider first the current legal wage floor. At $7.25 per hour, the federal minimum wage as of July 2009, a full-time year-round worker will bring home $15,080—less than the official poverty threshold of $17,330 for a family of three.

Moreover, poverty experts roundly criticize that official poverty line as too severe. According to the National Survey of American Families, nearly two-thirds of people in households with incomes above the poverty line but below twice that level reported serious economic hardships—failing to pay their rent, having their phone disconnected, worrying about running out of food, or relying on the emergency room for routine medical care.

Consider a more realistic poverty line: the “basic budgetâ€

Any discussion of "living wages" needs to start with border and trade policies. It makes no difference to anyone and has no positive impact on our economy to raise wages by law when the labor market is flooded and saturated by illegal aliens and good high paying jobs are flying out the window like farts on a sail boat.

The solution to poverty and economic hardship for the American People rests with 5 policies:

1. immigration policy - We have to stop illegal immigration, get illegal aliens out of the country so we have a legal proper work force so free market, free enterprise and supply and demand can do their thing, BEFORE any more laws or mandates are issued concerning our work force.

2. tax policy - We have to stop stealing wages and salaries through mandated income tax codes that deplete the very wages these idiots claim need to be higher.

A worker that earns $15,000 a year pays $1200 a year in social security and medicare taxes, and 12% on the rest of their wages after deductions, so another $1400 a year in federal income tax on $12,000 adjusted gross income. That's $2600 in federal income-based taxes on $15,000 a year in gross wages. At $12,000 single they're just over the poverty line of $10,080 or if they have 1 child they're under the poverty line of $14,000. If they didn't pay tax, they would be above it on both.

Here is what the FairTax would do for them.

The single person would go home with all $15,000 in wages plus never have to spend a dime filing a tax return. They would receive a $2,392 a year Rebate if they wanted it and signed up for it so now their take home is $17,392 at their current wage instead of $12,000. If the person has 1 child, their Rebate is $3,200 and their take home is $18,200. If the person as 2 children, their Rebate is $4,048 and their take home is $19,048. And no employer was forced by law to pay them anything except their fair market wage above minimum wages we already have established. None of these families would be eligible for entitlement programs any more because under these three scenarios they are all well above the poverty line and totally sustainable on their own. Take another scenario with 1 couple and 1 child, their Rebate is $5,612 and their net take home pay is $20,612. Still under the poverty line as presently established, but now there is some motivation for the second spouse to enter the work force on a part-time basis without affecting their tax rate, now it pays to work. If they work 30 hours a week at $7 an hour to keep the math easy, that's another $210 a week x 4 weeks, that's $840 a month or another $10,080 a year. Now the family can pay a few hours a day for day care if they need to depending on their work schedules, and now the little family of 3 has $15,000 from the primary earner, $5,612 from the Rebate and $10,080 from the second job, or $30,892 a year and now they're $6,000 a year above the poverty-line and going home with all they earned. Now all these families single, single with 1 or 2 kids and the couple with 1 child are all ABOVE the poverty line and OFF all entitlements, with more net expendable income in their pockets where it counts, can afford their own health insurance, buy their own food, fix their child or children their own school lunches, and still have some extra to enjoy life as they can best plan it, all thanks to the FairTax.

And it didn't cost taxpayers 1 dime and the US government didn't need to borrow 1 cent or tell 1 business what to pay their workers beyond minimum wage in order to achieve it. All the government did was change the way it collects tax revenue. Now the workers and these families have some extra money to buy some new things when they want or need them. They may even have enough to save a little, but at least and at minimum, they can pay their bills, afford health insurance, put a roof over their heads and feeds themselves without any assistance from the US government or the US taxpayer.

3. trade policy - We have to restore protected trade policy. It does no good at all to improve our labor rates by stopping illegal immigration and increasing net expendable income, if the very jobs we're protecting from illegal aliens are shipped out of the country through Free Trade Treason. We must manage our international trade so that we have trade surpluses instead of deficits, so when we invest in job creation, those jobs stay here in our country to produce the products and provide the services we need and want to buy. We'll still have enormous international trade but not so much that it sucks the money supply and jobs out of the country. We achieve that with balancing our trade payments or hopefully generating surpluses.

4. drug policy - We need to legalize the drug trade so we can stop spending tax payer money chasing drug criminals and incarcerating drug users. The current policy while well-intentioned on the surface doesn't work because it's a foreign run operation that spits on our laws because of a market that can't be killed, (we've tried for 100 years with no impact at all), that sucks our money supply out of the country, lures foreign cartels, illegal aliens and violence into our country, and the only people who suffer are the poor drug users who get caught and shipped off to prison while the $300 billion trade goes on enriching foreign cartels and all their PayPals, and now a family has lost an income-provider, is now on welfare and entitlements, and for what? Nothing.

5. energy policy - We need to drill baby drill and keep oil and gas prices as low as possible while we develop other affordable alternatives. It doesn't benefit anyone to restrict oil and gas to artificially escalate their prices to justify over-priced alternatives. Those working on alternatives must develop business models that reduce the cost of energy instead of depend on inflated oil and gas prices to justify their product as an alternative.

For the Tea Party Movement, we have to work on those policies that allow free market to work for a legal proper work force, that generate the economic activity to create the jobs that trade policies keep in our country to serve our market with a tax policy that will send these workers at all wage and salary levels home with all their earnings, and by natural course of operation reduce government spending.

Legalizing drugs saves $70 Billion a year in enforcement costs alone. Passing the FairTax saves $12 Billion a year in IRS budgets alone. If we pass the FairTax and reduce the number of people on entitlements by 25%, which it will day one, that saves another $100 Billion a year. If we protect our trade and balance our trade payments, that brings $700 Billion of private sector money supply and employment back to the US in manufacturing. If we legalize drugs, that brings back another $300 Billion a year in private sector money supply and employment in farming, manufacturing and retail operations back to the US and the American Worker.

For every 1 manufacturing job created in the US, 5 others are created by the multiplier effect. Balancing our trade payments and legalizing the drug trade brings back $1 Trillion a year in economic activity to the private sector.

For every $Trillion of new private sector money supply we generate, American Businesses create 15 million new jobs.

If we take these 5 simple actions to stop illegal immigration, pass the FairTax, protect our trade, end the War on Drugs and drill baby drill, there will be a good sustainable job at better than living wages for every American who wants or needs one and that worker will go home with all their earnings and then spend it supporting our businesses and manufacturers, save it increasing deposits and liquidity for our banks and/or invest it supporting our companies that provide us with all these wonderful products and services.

Then we can reduce our government spending by at least $300 Billion a year just on 4 programs, unemployment, MediCaid, welfare and SCHIP which in 2008 cost us over $580 Billion before counting the food stamp and free school lunch programs which cost another $55 Billion a year.

http://www.usda.gov/wps/portal/!ut/p/_s ... 2/0030.xml

That reduces a normal $3.1 Trillion annual budget, by $355 Billion a year. Now add the savings of $82 Billion a year by eliminating the War on Drugs ($70 B) and the IRS ($12 Billion) and we've reduced government spending by a total of $437 Billion a year or 14% before counting the interest saved on the borrowings it took to fund these programs in the first place.

Now look at the FairTax rate of 23%. What does a 14% reduction in the total budget do to that? Well, the FairTax rate is split between 8.09 dedicated or earmarked to social security and medicare and 14.91 for general revenue. Since our $437 Billion is all being saved out of the general revenue side of things, it means we can reduce the 14.91 general revenue rate by 20% to 12.1% and the total FairTax rate to 20%. Now we've balanced our federal budget, reduced our tax burden, expanded our manufacturing base, increased the net expendable income of all Americans, recovered our money supply and put it to work in American Businesses who in return created 15 million new good paying jobs in America, and we didn't raise government spending 1 dime, we reduced it by $437 Billion, we didn't borrow 1 cent, we reduced our borrowings by $437 Billion, and we didn't hurt 1 American, we increased their expendable income, expanded their liberties, restored their privacy, dignity and sustainability and brought them several steps closer to their American Dream for themselves and the next generations of Americans.

Not bad, for 5 simple little actions, huh?

"A penny saved is a penny earned".

Good point Judy. However, I honestly don't know what to think about the fair tax. I see your points, which are valid, but I have also seen the opposition on here, which are just as valid. Personally, I think BOTH sides are ignorant to the whole truth. Just like the Dream Act. Many Americans know about it, but they just haven't read the WHOLE bill that lets them in on the negative aspects of it.

Judy, have you read the ENTIRE bill? Are you sure there isn't anything in there that would do more harm than good? I propose the same question to those that oppose the fair tax. I personally like the idea of the fair tax, but then again, the IDEAS of socialism and Marxism SOUNDS good, but it's the implantation of those ideas that make it wrong. The verbiage is lost along the way.

Originally Posted by jshhmr

Good point Judy. However, I honestly don't know what to think about the fair tax. I see your points, which are valid, but I have also seen the opposition on here, which are just as valid. Personally, I think BOTH sides are ignorant to the whole truth. Just like the Dream Act. Many Americans know about it, but they just haven't read the WHOLE bill that lets them in on the negative aspects of it.

Judy, have you read the ENTIRE bill? Are you sure there isn't anything in there that would do more harm than good? I propose the same question to those that oppose the fair tax. I personally like the idea of the fair tax, but then again, the IDEAS of socialism and Marxism SOUNDS good, but it's the implantation of those ideas that make it wrong. The verbiage is lost along the way.

Yes, I've read the entire bill numerous times, and studied in-depth many sections of it. Everything I know about the FairTax comes directly from the legislation itself. I've studied taxation since college, I've worked for a state economic development agency, I've worked for a major corporation, and I've run my own business for awhile. I have a minor in economics and have worked in the area of economic and industrial development for over 3 decades, except for 1 year when I worked for a state department of revenue that collected taxes.

Our society and businesses are manipulated by the existing tax code, and that's a very serious problem for our country from which our people and businesses need liberation. The FairTax does that.

One of the historical issues with a national retail sales tax was that it is by nature regressive without an offset because it's a flat rate tax. A flat rate tax is a regressive tax which is a bad thing, whether it's a sales tax or an income tax, because it mathematically takes a greater percentage of someone's wealth, income, assets or whatever is being used to pay the tax from lower income lower wealth individuals and companies. Thus was born the graduated tax rate that taxed higher incomes and assets at a higher rate than lower incomes and assets, and from that was born the progressive income tax system that we have now. Deductions and tax credits and special treatment are included in this tax system, a complex tax code that targets one group to provide a benefit to another group, to induce one group to do something to benefit another group, to manipulate businesses and citizens into activities they wouldn't otherwise pursue but do because of tax benefits to follow the manipulation of their lives and businesses by the government.

For example, take the home mortgage deduction that is used to induce people to not only buy a home but buy a bigger home for the tax write-off. What has this done to our society? Well, it created urban sprawl, increased worker commutes, generated ghettos in the inner cities, required more infrastructure for roads and utilities, developed hundreds of millions of acres of wilderness, natural habitat, farms, forests to build houses for people who wanted to buy a home or a bigger home to have a tax write-off which then required shopping centers near the homes built to have a tax write-off, that left our cities and core business districts in shambles. Would all these people have bought a home 40 minutes from work without a tax write-off? Some may have, but far less would have than did because of the tax write-off.

So who benefited from this tax write-off? Home builders and retail developers. Who suffered? Everyone else, taxpayers, communities, cities, businesses, governments, states, citizens, even the home-buyers who now have mortgages and property taxes and maintenance costs they didn't have before, they now have longer commutes they didn't have before, they now no longer have nice cities to visit, and now our country has a financial crisis from a housing bubble that of course has burst and back-fired on everyone like all manipulative government policies will do eventually.

The FairTax changes all of that. Under the FairTax, no business pays any FairTax. Retail businesses who sell to the consumer collect the tax from consumers and are paid well for the service they provide. They collect it at 1 rate on everything and send it in to the states who then send it in to the federal government once a month.

Businesses are now free from taxation. Individuals are free from taxation except when they decide on their own to make a purchase of a new good or service, whatever they want, without manipulation, without prejudice, they pay a tax on that product or service. There is no paperwork for them, there is no requirement of them except to look at their receipt and make sure the vendor charged them, no forms to file, no returns to file, no books to guide you on filing an income tax return, no fees to be paid to tax preparers, no time to be spent on gathering up your records and hauling them across town to a tax preparer, no disclosure of everything going on in your life and everything you have or have accumulated, no standing in line at the post office to mail your returns, no notices from the IRS, no booklets from the IRS, nothing ... citizens are free from reporting to the government, free from studying their stupid tax codes every year, free from manipulation, free from filing expense, free from tax, free from government.

Under the FairTax, when you shop or buy something, it's in the price you pay for a new product or service and the amount you paid will be on your receipt if you're interested. That's it for consumers. There is no FairTax on used goods, so no used product vendor will be charging it, if they do, they're running a scam. Report them. That's it. It's that simple, that easy.

So what about the regressive nature of this tax? Well, the brilliant economists that developed the FairTax came up with the perfect solution, the Rebate to reimburse citizens and legal residents for estimated expenditures for essentials up to the poverty line based on the number of people in the household. It's voluntary, you can sign up if you want or not, no one is forced to receive it. To sign up you list the names of the people in your legal household along with their social security numbers, ages and relationship and send it in to the Social Security Administration who handles the Rebate program. You update the form once a year. That's it. Your household then receives a Monthly Rebate in an amount already pre-determined by the number of adults and children up to 6 in the household. The monthly rate is same for all adults at $199 and all children at $69 up to 6, without prejudice, without manipulation, without discrimination.

The Rebate is the reason the FairTax is called the FairTax, the Rebate is what makes it fair in the sense that it offsets the regressive nature of a 1 rate sales tax so that lower income and lower wealth persons aren't paying more of their income or wealth than higher income persons for their essentials, because NOBODY pays FairTax on their essentials up to the poverty line. After that, everyone is on their own making their choices as they see it to plan and build their lives with their earnings and incomes, assets, savings and investments, free of government manipulation.

If you believe in free enterprise, you will love the FairTax. If you think no one should pay tax on the essentials of life, you will love the FairTax. If you think citizens should control the purse strings of the federal government instead of elected political hacks and their PayPals, then you will love the FairTax. If you believe workers should go home with all the money they slaved for, then you will love the FairTax. If you think businesses should focus on their business and keep their nose out of our government, then you will love the FairTax.

If you believe a citizen earning $50k a year should have the same power as one who earns $20k a year and they both should have the same power as one who earns $2 million a year, then you will love the FairTax. If you think citizens should have the right to decide what government spending they underwrite, then you will love the FairTax. If you believe citizens should have the right, power and means to boycott wrongful acts of their government, then you will love the FairTax.

If you believe citizens should know how much their government is collecting in revenue every month, then you will love the FairTax, because the collections the states make every month can and will be reported every month, so citizens can watch the revenue the feds are collecting from what states in FairTax on the internet every month.

In fact, soon after the FairTax goes into effect, there will be demands that the federal government post what it spent every month on the internet, so citizens watch the revenue come in and the expenditures going out, every month. No research, no digging for "how much", right there, every month, on the internet. No more of this waiting until we're billions and now trillions in debt to see what went wrong. Every month, citizens can watch the receipts and expenditures of their government on the internet.

The FairTax gives us our country back. It's not the only step we need to take to fix our economy, but it is one of the most crucial while being the absolute easiest and quickest of them to implement to get the ball rolling. Once citizens control the purse strings of the federal government, we can control our borders, we can can control our trade policies, we can control our job market, we can control our businesses, because now we control our government.

No more will tax issues control our election debates, no more will politicians be able to buy votes with $400 tax credits for some, but not for others, or lower rates for some paid for with higher rates on others. No longer will illegal aliens be able to live in our country without paying their share of federal taxes like everyone else. They pay FairTaxes like everyone else, but they don't receive the Rebate.

No longer will National Council of La Raza be allowed to use tax-exempt corporate contributions to work on Open Borders at the expense of American tax-payer, where we pay more taxes because corporations paid less by contributing to NCLR. No more will National Council of La Raza be allowed to use those tax-exempt funds to support the lobbying activities destroying our country while ALIPAC has to rely on non-tax-exempt funds to defeat them and try to save our country.

No longer are businesses expected to be profitable working with only 70% of our nation's expendable income and stay in business operating on only 60% of their profits. No more will income-based taxes force people into poverty or dictate their decision to work, earn, buy, sell, borrow, save or invest or penalize them when they do.

There is no down-side to the FairTax. It's all up-side for everyone. For the first time in almost 100 years, the American People will be free from the financial mandates and manipulations of the Federal Government.

In addition, I expect that once the FairTax passes, most if not all states will move promptly to passing State FairTax legislation of their own so they collect their taxes in the same ideal manner. I even expect cities and counties to do the same, so that virtually all taxation in America is collected in FairTaxes on all levels. They may keep a few excise taxes here and there but those too will eventually phase out as the silly things they've always been.

Again, the FairTax isn't the only thing we need to do to fix our economy, but it's the best most crucial first step, and it's the easiest step to take that will make the biggest difference both economically and politically because it not only empowers Americans with all their earnings and at least 40% more expendable income from their earnings, it empowers Americans with the purse strings of their government to force the government to do the job it's supposed to do for the American People as in securing our borders, enforcing US immigration law, deporting illegal aliens, protecting our trade, and all the other things we want and need our government to do to fix our economy.

It will never get any better for the American People than the FairTax, and they need to grab it, run with it and demand passage immediately.

www.fairtax.org